CBO: Federal deficits and debt to worsen over next decade

Congressional Budget Office Projects Worsening Deficits and Rising National Debt

The nonpartisan Congressional Budget Office released a sobering 10-year fiscal outlook on Wednesday, projecting a significant deterioration in America’s financial position with federal deficits worsening and public debt climbing to historic levels.

The CBO report indicates that federal debt held by the public is on track to rise from 101% of GDP currently to 120% over the next decade—a level that would exceed historical highs. This growing debt burden is primarily driven by increased government spending, particularly on entitlement programs like Social Security and Medicare, alongside mounting interest payments on existing debt.

Compared to last year’s analysis, the fiscal outlook has deteriorated further. The report highlights that the 2026 deficit is now projected to be approximately $100 billion higher than previously estimated. Looking at the full forecast period, total deficits from 2026 to 2035 are now expected to be $1.4 trillion larger than in earlier projections.

Several major policy developments have contributed to this worsening outlook. The CBO’s analysis incorporates recent legislative actions, including the Republican-backed tax and spending package known as the “One Big Beautiful Bill Act,” increased tariffs implemented by the administration, and the immigration crackdown that includes large-scale deportations from the U.S. mainland.

The report notes that higher tariffs are expected to generate about $3 trillion in additional federal revenue, partially offsetting some of the deficit increases. However, these same tariff policies are projected to fuel higher inflation from 2026 through 2029, creating additional economic challenges.

Economists warn that this rising debt trajectory poses significant risks to America’s economic future. As more federal spending goes toward debt service—essentially repaying investors for borrowed money—less funding remains available for critical investments in infrastructure, education, and other areas that drive economic growth and competitiveness.

The inflation forecast also presents concerns. According to the CBO, inflation isn’t expected to reach the Federal Reserve’s 2% target until 2030, suggesting a prolonged period of economic adjustment ahead.

Jonathan Burks, executive vice president of economic and health policy at the Bipartisan Policy Center, characterized the situation as unusual, noting that “large deficits are unprecedented for a growing, peacetime economy.” Despite the concerning trends, Burks emphasized that policymakers still have time to change course.

“We encourage lawmakers to work together to explore options for raising revenue, trimming spending, and slowing the growth of the major cost drivers,” Burks said. “Congress and the administration should seize the opportunity to act now before the available menu of choices becomes much more painful.”

Recent congressional approaches to addressing fiscal imbalances have relied heavily on temporary measures, including targeted spending caps and debt limit suspensions. When the U.S. approaches its statutory spending limit, “extraordinary measures” are often deployed to prevent default. However, these actions have frequently been coupled with new large-scale spending or tax policies that maintain high deficit levels rather than reducing them.

President Donald Trump’s administration has attempted to address spending issues through the Department of Government Efficiency (DOGE), which aimed to balance the budget by eliminating $2 trillion in waste, fraud, and abuse. However, budget analysts estimate that DOGE’s actual impact has been far more modest, cutting between $1.4 billion and $7 billion primarily through workforce reductions.

Michael Peterson, CEO of the Peterson Foundation, characterized the CBO’s latest projection as “an urgent warning to our leaders about America’s costly fiscal path.” He emphasized the political importance of addressing these issues, noting that voters increasingly understand the connection between rising national debt and their personal economic circumstances.

“Stabilizing our debt is an essential part of improving affordability, and must be a core component of the 2026 campaign conversation,” Peterson added, suggesting that fiscal policy will likely emerge as a central issue in upcoming elections.